With more Filipinos becoming financially aware and investment-curious, variable unit-linked (VUL) insurance continues to generate both interest and confusion.
In a recent episode of 大象传媒 B-Side, Ivan Corcuera, Head of听Insurance Investments at Sun Life听Investment Management and Trust Corporation, clarified how VUL works, when it is听appropriate, and why understanding its fundamentals is crucial before investing.
Mr. Corcuera emphasized that there is no one-size-fits-all solution in financial planning. An individual鈥檚 needs vary depending on life stage, responsibilities, and goals. A single professional with no dependents may not prioritize life insurance听immediately, while a breadwinner supporting a family would听likely require听substantial protection.
鈥淭he financial advisor would听identify听the client’s financial needs and offer solutions that would fit the needs of that client, depending on the client’s budget. Even one product, one insurance product, can have multiple use cases. One can buy an insurance product听as a means to听protect their loved ones when something untoward happens to the policyholder,鈥 he said.
A key distinction highlighted in the discussion was the difference between traditional life insurance and VUL. Traditional products are designed for pure protection, offering guaranteed benefits for a defined period or throughout the policyholder鈥檚 lifetime. VUL, on the other hand, combines life insurance with an investment component.
鈥淥ne of the key differences is really the investment component. For a traditional product, it鈥檚 pure insurance. If you just need insurance, then this would be the ideal product for you. If you want the best of both worlds, then we have VULs,鈥 Mr. Corcuera explained.
However, Mr. Corcuera underscored that VUL should first and foremost be viewed as a life insurance product, explaining that one buys a VUL because they need protection. Misconceptions arise, he noted, when VUL is marketed primarily as an investment vehicle. Historically, some clients focused on projected returns illustrated in policy proposals, expecting sustained high growth.
鈥淲e need to go back to the fundamentals of what a VUL plan is. You buy a VUL because you need life insurance. You need protection first and foremost,鈥 Mr. Corcuera said. 鈥淵ou can think of the investment component as an add-on 鈥 a feature that allows the fund value to potentially grow and help pay for insurance charges over time.鈥
Another topic touched on in the episode is market volatility. Mr. Corcuera expounded that risk and return are positively correlated, as higher potential returns come with higher fluctuations. During downturns, he advises investors to avoid knee-jerk reactions and instead reassess goals and maintain composure.
鈥淚 think听one听very important听skillvery important scales听for听an investor听shouldto听have听would beis听keeping their composure. And I would always听advise clients and advisors to听reassess before doing anything rash. In fact, some of our advisors would听actually tell听our clients to increase contributions or do what we call top-ups during market downturns to capitalize on lower prices,鈥 he said.
Beyond understanding product features and navigating market fluctuations, Mr. Corcuera stressed that effective financial planning听ultimately depends听on meaningful conversations between advisors and clients.
鈥淔or me, good guidance starts with listening and asking the right questions. A good financial advisor would typically ask: What are your financial goals? What are your priorities? Do you have dependents relying on your income? Are you focused on protection? Do you want wealth accumulation? What capacity do you have to pay premiums?鈥 Mr. Corcuera stressed.
Listen to the full episode here: 听
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